The bill, S.B. No. 1891, amends the Water Code to establish new regulations regarding the test years used for ratemaking purposes by water and sewer utilities classified as Class A, B, C, or D. A regulatory authority is required to set rates based on a test year selected by the utility, which can include historic, future, or a combination of both types of data. The test year must begin on the first day of a calendar or fiscal year quarter and span a consecutive 12-month period that starts no later than 18 months after the utility files a statement of intent to change rates and ends no earlier than 18 months before that filing date. Additionally, the bill specifies that utility rates should be based on the original cost of property used during the test year and allows for the inclusion of projected facilities in the rate base.

The bill also modifies existing provisions regarding the determination of utility expenses and revenues, emphasizing that these should be based on test year information. It repeals a specific definition in the Water Code and clarifies that the changes will only apply to rate proceedings that commence after the bill's effective date of September 1, 2025. Overall, the legislation aims to provide a more flexible and transparent framework for setting utility rates, ensuring that they reflect current and projected service conditions while maintaining the financial integrity of the utilities.

Statutes affected:
Introduced: Water Code 13.183, Water Code 13.184, Water Code 13.185, Water Code 13.002 (Water Code 13)